The owner of the Los Angeles Times on Thursday bought out a major shareholder that had pushed for a sale — and at the same time gave the company's chairman, Michael Ferro, the ability to boost his ownership stake.
The moves heightens competition between the newspaper company's two largest shareholders, Ferro and L.A. billionaire Dr. Patrick Soon-Shiong. Tronc Inc. owns The Times, the Chicago Tribune and other daily newspapers. Ferro and Soon-Shiong have been steadily buying up more shares of the company, but had been limited to purchasing no more than 25% of outstanding shares.
In a regulatory filing Thursday, Chicago-based Tronc reported that it had paid $56.2 million — more than a quarter of the company's year-end cash on hand — to acquire shares owned by Oaktree Capital Management. The price represents a 14% premium over Thursday's closing share price of $13.16.
In the same filing, the company said Ferro would be allowed to acquire as much as a 30% stake in the company. That change would allow Ferro to hold more shares than Soon-Shiong.
A spokesman for Soon-Shiong said Thursday that the L.A. physician and investor was caught off guard by Thursday's news and plans to petition the board to allow him to boost his stake, too. Soon-Shiong remains a board member until the company's annual shareholder meeting in April.
"Dr. Soon-Shiong's attorneys will be writing the company to request his contract also be amended to allow his stake to also be increased to 30% from 25%," according to an emailed statement. "He believes all shareholders should be treated the same."
A Tronc spokeswoman did not respond to a request for comment on the statement.
Soon-Shiong's statement verifies reports of tension with Ferro, who last year brought him in to beat back a buyout offer from publisher Gannett Co. That partnership gave Ferro a wealthy ally and the two laid out a vision to use technology and artificial intelligence — some of it to be provided by Soon-Shiong's companies — to help reinvent the media company. That deal did not materialize.
The board resisted several overtures from Gannett to buy the company. Oaktree and other shareholders threatened litigation after Ferro and the board refused to accept a $15-a-share offer from Gannett, which owns USA Today and dozens of other daily publications. Gannett withdrew its offer in November after its financing reportedly fell apart.
Over the last few weeks, there have been signs of discord between Ferro and Soon-Shiong. Tronc this month reported in regulatory filings that Soon-Shiong, the company's vice chairman, had not been nominated to serve again in the coming year.
A source familiar with Soon-Shiong's thinking said the doctor objected to some of the company's spending — particularly on private jet travel and sports tickets for Ferro and others — and that the board seemed to schedule meetings and calls at times inconvenient for Soon-Shiong.
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